The Russian Ruble crisis - Assignment Example

The Russian Ruble Crisis Q.2 The period between 1992 and 1998 saw Russia go through hard economic times. The value of the Ruble deteriorated over the years within that period, resulting in critical inflationary pressures in the Russian economy. The continuous loss of ruble value between 1992 and 1998 highlights a critical relationship between currency values and inflation rates. Increase in inflation rates result in low currency values. High inflation rates in the Russian economy saw the ruble lose its value enormously. Q.3The mid-1990s IMF economic recommendations to Russia failed to be implemented due to a number of reasons.

One, the economic hardships in Russia at the time had taken a political dimension. This derailed the government’s course to adhere to the targets set by IMF. Two, the tax system in Russia was so complicated to be aligned with the IMF requirements. Three, increasing public debts made it harder for the Russian government to implement IMF’s demands. Finally, the Russian government had other economic hardships that awaited its attention; among them persistent inflation and critically low ruble value.Q.4Russia’s tax cuts and increased government revenue had been deemed unachievable for quite some time.

The early 2000s move and subsequent results proved otherwise. Reduced tax rates translated to increased government revenue. This was the case because individual and corporate tax payers considered compliance to be cheaper than evading tax payment. This realization did not mean that policy prescriptions by IMF were wrong. Rather, the Russian government took action with regard to its situation subject to having parted ways with the IMF.